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Important Tax Information

A financial advantage of professionally managed investments

There’s one important issue that private landlords often forget to take into consideration, causing serious confusion and trouble in the long run - tax. The IRD have strict rules and regulations around investment properties and the tax on rental income. If a private landlord isn’t diligent throughout the year, keeping very accurate records of the incomings and outgoings for each property, they often lose out in the tax process - in some cases, even paying more tax than what they should. 


This is another reason why having your property professionally management has huge benefits. With all income and expenses for your property managed by a professional team, reporting is simple and the documents necessary for your tax return are all provided to you at the end of the financial year. Your property managers are always up to date with the any legislative changes around rental properties and tax so you can rely on them to provide accurate information in the tax process. 


So to help everyone understand the tax obligations around rental property income, read the below information. It has been shared by the IRD and you can visit their website to find out more; www.ird.govt.nz.


Managing a Rental Property 

  • If you’re renting out a property, then you’ll have tax to pay on the rental income you earn. The rental income could be from renting out land, buildings, a holiday home or a room in your own home. 
  • Rental income has to be taxed in the same year that you receive it. 
  • There are some expenses related to maintaining and renting out your property that you can claim for. 
  • There is no GST on residential rental property. However, if you own an investment apartment with a management or service there may be GST implications to consider.
  • If you switch between renting out property and property dealing, you may be liable for tax when you sell. 


Paying Tax on your Rental Income 

Generally, any income that you receive from renting out property will be liable for income tax, so you must include it in your tax return. This income could be from renting out land or buildings, or it could be income you earn by having private boarders or flatmates living with you. 


Rent In Advance 

If you receive rent in advance, it is taxable in the year in which you receive it. For example, if your tenant paid rent on 30 March 2006 which covers the following two weeks, you must still return this income in the income year 1 April 2005 to 31 March 2006 (If you have a standard 31 March Balance). 


Tenancy Bond 

Amounts received for tenancy bond and passed on to the Tenancy Bond Centre are not income. Amounts received from the Tenancy Bond Centre for payment of damages, rent arrears etc. should be included as income. 


Expenses for Rental Properties 

The following expenses can be deducted from your rental income: 

  • Rates and insurance
  • Interest paid on money borrowed to finance your property 
  • Agents fees and commission
  • Repairs and maintenance 
  • Motor vehicle and travel expenses
  • Legal fees for arranging the mortgage or finance to buy the property 
  • from the 2010 income year and beyond, legal feed for buying and selling a property can be deducted providing your total legal expenses for the year including the fees associated with buying and selling a property are equal or less than $10,000. Before the 2010 income year, legal fees for buying and selling property are not deductible. 
  • Income from Rental Properties 
  • Mortgage repayment insurance 
  • Accounting fees for the preparation of accounts
  • Depreciation (but not building depreciation) 



Property Tax Changes - October 2015 

On 1 October 2015 property tax rules changed, having big implications on investment properties. The important things all landlords need to know include: 


New Bright Line Rule 

The bright-line rule only applies to residential property bought on or after 1 October 2015. Under this rule you’ll pay tax on income you earn if you buy and sell a home within two years, unless you’re selling your main home or another exception applies. 


New Information Requirements

When buying, selling or transferring New Zealand property, excluding your main home, you’ll provide your: 

  • IRD number
  • Taxpayer Identification Number (TFN) from any overseas countries where you have to pay tax on your worldwide income, if you have one. 


You’ll give your property lawyer or conveyancer this information and may choose to do so by filling in a Land Transfer Tax Statement which is available here.